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Keywords

motionleasebankruptcychapter 11 bankruptcyobjection
motion

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In re Indianapolis Downs, LLC., 486 B.R. 286

Facts

Indianapolis Downs, LLC and Indiana Capital Corp. operated a racino in Shelbyville, Indiana, and filed for Chapter 11 bankruptcy on April 7, 2011, due to substantial secured indebtedness exceeding $450 million. The Debtors entered bankruptcy after failing to make required interest payments and sought to restructure their debts through a joint plan of reorganization. After extensive negotiations, they reached a Restructuring Support Agreement with key creditors, which laid the groundwork for their proposed plan, ultimately leading to a successful bid for their assets from Centaur LLC.

The Debtors operate a combined horse racing track and casino—a 'racino'—in Shelbyville, Indiana. They employ over 1,000 people and provide patrons a wealth of wagering and entertainment options.

Issue

The main legal issues included whether the votes of creditors who executed a post-petition restructuring support agreement should be designated, the feasibility of the proposed plan, and the appropriateness of the plan's release provisions.

The Oliver Parties contend that the RSA constituted a wrongful post-petition solicitation of votes on a plan prior to Court approval of a disclosure statement.

Rule

The court applied the principles of the Bankruptcy Code, particularly sections 1125 and 1126, regarding solicitation of votes and the requirements for plan confirmation, including feasibility and treatment of administrative and priority claims.

The structure and timeline for the Chapter 11 plan process is well known: a debtor enjoys a limited exclusive period to develop and formulate a plan of reorganization.

Analysis

The court determined that the designation of votes was not warranted as the Restructuring Support Agreement did not constitute solicitation under the Bankruptcy Code. It found that the Debtors had demonstrated the feasibility of their plan, as it provided reasonable assurance of success despite the need for regulatory approvals. The court also concluded that the proposed caps on administrative and priority tax claims did not violate statutory rights, as they were conditions for confirmation rather than limitations on payments.

The Court finds the analysis and reasoning in Heritage dispositive. Congress intended that creditors have the opportunity to negotiate with debtors and amongst each other; to the extent that those negotiations bear fruit, a narrow construction of 'solicitation' affords these parties the opportunity to memorialize their agreements in a way that allows a Chapter 11 case to move forward.

Conclusion

The court confirmed the joint plan of reorganization, overruling the objections and denying the motion to designate votes. The plan was deemed feasible and compliant with the Bankruptcy Code.

The Motion to Designate is denied.

Who won?

The Debtors prevailed in the case as the court confirmed their plan of reorganization, finding it feasible and supported by the majority of creditors.

The Debtors and the Restructuring Support Parties, by contrast, dispute that developing and executing the RSA is a 'solicitation' within the meaning of §§ 1125 and 1126.

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